Financial Analysis - Food Tyson Foods (NYSE:

Financial Analysis - Food

Tyson Foods (NYSE: TSN) is a major food producer specializing in meat products, and is one of the largest food product companies in the world. This paper will analyze Tyson's financial performance using a number of different tools. The first will be a year-over-year financial analysis, based on raw numbers. This will be followed by a trend analysis, percentage analysis and finally a ratio analysis. Lastly, conclusions will be drawn with respect to Tyson's recent financial performance. The most recent fiscal year for Tyson is the 2010 fiscal year, which ended on the 2nd of October, 2010.

Tyson recorded earnings of $28.43 billion in 2010, which was a record for the company and an increase over the previous year. The company doubled its gross profit in 2010 and recorded a record net income. The performance in years previous was marked by strong fluctuations, including a large writedown in 2009 of $560 million in its beef business that was associated with a transitional period in the business including the appointment of a new CEO (Becker, 2009). The company's record profits in 2010 were largely the result of record-high prices, combined with productivity improvements (Peters & Stynes, 2010). Over the past several years, the balance sheet has remained rangebound in general, although the book value of the company's equity has generally been trending upward.

Revenue increased 6.4% in 2010 over the previous year, and 15.6% over 2006 levels. Gross profit increased 108.9% over the previous year, and 164.6% over 2006 levels, indicating strong performance with respect to containing the cost of goods sold. The net income was 4775.0% higher than the net income of the year prior, adjusted for the beef writedown. Selling, general and administrative expenses were the same as they were five years ago when revenues were significantly lower, indicating solid cost controls at Tyson are in place. On the balance sheet side, the firm's assets increased 1.5% over 2009 levels but are down 3.4% over 2006 levels. Liabilities are down 10.9% over 2009 levels and 19.6% over 2006 levels. Equity is up 17.4% over 2009 levels and 16.3% over 2006 levels.

Tyson's liquidity ratios have improved. The current ratio is now at 1.81, compared with 2.19 in 2009 and 1.47 in 2006, indicating a long run trend of improvement. The debt-to-equity ratio in 2010 was 108%, compared to 141% in 2009 and 150% in 2006, again indicating long-term solvency and liquidity improvement. Among operating ratios, the receivables turn was 24.7 times in 2010, 22.5 times in 2009 and 20.8 times in 2006, indicating a long-run improving trend. The inventory turn was 12.1 times in 2010, 11.2 times in 2009 and 11.5 times in 2006, again indicating a long-term improving trend. The highly volatile net income figures makes calculating ROI, ROE and ROA figures less reliable, especially given that the loss in 2009 was related to a writedown. The company's margins have been improving over the years. The gross margin in 2010 was 8.8%, compared with 4.5% in 2009 and 3.7% in 2006. The operating margin was 5.2% in 2010, 1.3% in 2009 and -0.2% in 2006. The net margin was 2.7% in 2010, 0.0% in 2009 and -0.7% in 2006, again indicating a long-run improving trend in the margins. These results in general support the idea that Tyson is improving its financial performance and has been over the course of the past few years.

Percentage ratios can help to indicate the changes in the company's structures over time. The selling, general and administrative expenses were 3.2% of revenues in 2010, 3.1% of revenues in 2009 and 3.7% of revenues in 2006, indicating a general trend towards cost control. Liabilities as a percentage of assets were 51.9% in 2010, 58.4% in 2009 and 60% in 2006. Long-term debt as a percentage of assets was 19.8% in 2010, 30.7% in 2009 and 26.8% in 2006, indicating a long-run improving trend.

The company's asset utilization has clearly improved, both in terms of ROA, which obviously has improved from its lack of profitability in most prior years to record profitability last year. In addition, Tyson has improved its asset turnover as well. For example, asset turnover in 2010 was 2.66, in 2009 it was 2.49 and in 2006 it was 2.21, which shows yet again a long-run improving trend in the company's asset utilization statistics.